Problem 2 (20 points). You are auditing Rangoon Corporation and you have come across several items that may require year end adjustments. The following items listed below require your consideration before you complete your audit. The company has an average income tax rate of 35% and all items are considered material in nature RANGOON CORPORATION ITEMS THAT MAY REQUIRE YEAR END ADJUSTMENTS FOR FISCAL YEAR ENDING SEPTEMBER 30, 20X4 (a) Merchandise inventory was overstated by $200,000 at October 1,20X3. The company uses the periodic inventory system to account for its inventory. The merchandise inventory was properly stated on the books at September 30, 20X4. (b) | On April 1, 20X1 (31/2 years ago), the purchase of machinery was debited to Repair Expense in the amount of $100,000. The machinery was expected to have a useful life of 8 years with a residual value of $4,000 at the time of purchase. The company uses straight line depreciation for depreciating these types of assets. (c) A patent, that originally cost $100,000, has been amortized on a straight line basis since July 1, 20X0 based upon a useful life of fourteen years. However, due to changes in technology the useful life of the patent on October 1, 20X3 is estimated to be only six more years. Effective October 1, 20X3, the company changed its depreciation method from 200% declining balance to straight line depreciation on furniture and fixtures. The assets were originally purchased on October 1, 20X1, at a cost of $800,000, with an estimated useful life of eight years and $20,000 residual value. (d) (e) On October 1, 20X3, the company received $150,000 from a customer for services to be rendered evenly over the next 18 months beginning on November 1, 20X3The entire amount was credited to Service Revenue Earned on October 1